June 11, 2019 / 4:09 AM / 7 days ago

RPT-UPDATE 1-Sugar output in key Indian state to plunge on drought -govt official

(Repeats with no changes to text)

* Maharashtra 2019/20 output seen at 6.5 mln T

* Lower sugar production will bring down inventories, ease exports

* India could set 2019/20 export target below 5 mln T -dealer

By Rajendra Jadhav

MUMBAI, June 10 (Reuters) - Sugar production in India’s western state of Maharashtra, the country’s second-biggest producer, is likely to fall by 39.2% year on year in 2019/20 to 6.5 million tonnes because of a drought-hit cane crop, a senior government said Monday.

The drop will ease pressure on Indian sugar mills to export surplus sugar and support global prices that fell more than 20% last year, partly because of subsidised exports.

“Drought has badly affected crops in the central part of Maharashtra. The cane area has fallen and we are expecting lower cane yields as well,” Maharashtra sugar commissioner Shekhar Gaikwad told Reuters.

Area under cane for the 2019/20 marketing year, which starts Oct. 1, fell 28% because of drought, he said.

Maharashtra received 23 percent less rainfall than normal during the June-September monsoon season in 2018, state government data shows.

The state produced 10.7 million tonnes of sugar in the 2018/19 marketing year ending on Sept. 30.

The drought also created a fodder shortage in the state and prompted farmers to feed cane to cattle, Gaikwad said.

In the current year India is likely to produce a record 33 million tonnes of sugar, increasing inventories.

Years of bumper cane harvests and record sugar production have hammered domestic sugar prices, making it hard for mills to pay money owed to farmers, who form an influential voting bloc.

To bring down cane arrears and reduce rising inventories, New Delhi has been providing incentives to mills for overseas sugar sales and set an export target of 5 million tonnes.

The drought could prompt India to reduce the export target for the next season, said one Mumbai-based dealer with a global trading firm. (Reporting by Rajendra Jadhav, Editing by David Goodman)

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